How FinTech affects financial sustainability: Evidence from Chinese commercial banks using a three-stage network DEA-Malmquist model

Paper: arXiv 2511.02608

Authors: Yudi Yang, Fan Yang, Xiajie Yi, Dongwei He

Abstract

This paper investigates the impact of financial technology (FinTech) on the financial sustainability (FS) of commercial banks. We employ a three-stage network DEA-Malmquist model to evaluate the FS performance of 104 Chinese commercial banks from 2015 to 2023. A two-way fixed effects model is utilized to examine the effects of FinTech on FS, revealing a significant negative relationship. Further mechanistic analysis indicates that FinTech primarily undermines FS by eroding banks’ loan efficiency and profitability. Notably, banks with more patents or listed status demonstrate greater resilience to FinTech disruptions. These findings help banks identify external risks stemming from FinTech development, and by elucidating the mechanisms underlying FS, enhance their capacity to monitor and manage FS in the era of rapid FinTech advancement.

Complexity vs Empirical Score

• Math Complexity: 5.5/10
• Empirical Rigor: 7.5/10
• Quadrant: Holy Grail — high math complexity, high empirical rigor

Why this score: The paper applies a solid econometric and operations research toolkit—combining a three-stage network DEA-Malmquist index with two-way fixed effects regressions—to a substantial panel of 104 Chinese banks over 2015–2023. It provides meaningful empirical insights into how FinTech disruptions affect bank efficiency channels, backed by clear writing and detailed institutional context.

Research Flowchart

  flowchart TD
    A[Research Goal: Impact of FinTech on Bank Financial Sustainability] --> B[Data Collection: 104 Chinese Commercial Banks]
    B --> C[Stage 1: Three-Stage Network DEA-Malmquist Model]
    C --> D[Calculate Financial Sustainability & Efficiency Scores]
    D --> E[Stage 2: Two-Way Fixed Effects Empirical Model]
    E --> F[Key Outcome 1: FinTech Negatively Impacts Financial Sustainability]
    E --> G[Key Outcome 2: Mechanism via Reduced Loan Efficiency & Profitability]
    E --> H[Key Outcome 3: Listed Banks & High Patent Volume Show Resilience]